THE MICROSOFT INVESTOR: Enterprise Sales And Curbed Expenses Should Save Microsoft This Quarter

MSFT Up With Market The market is surging this morning on news of continued stability in Korea, and announcements that China will be backing the euro. Shares of MSFT are up about 50 basis points. Upcoming catalysts include holiday quarter earnings results announced after the close on Thursday, January 27; Steve Guggenheimer of Microsoft's OEM Division will speak at the JP Morgan Tech Forum at CES on Thursday, January 6; entrance into the tablet market (to be announced at CES); Windows Phone 7 adoption; strides against current market leaders in cloud computing; holiday sales of Kinect; and continued upgrade cycles of Office 2010 and Windows 7. The stock currently trades at 9x Enterprise Value / TTM Free Cash Flow, inexpensive compared to historical trading multiples.

Microsoft Has Tough Year-Over-Year Comps But Should Be Ok Because Of Enterprise Sales (Barron's)Pacific Crest analyst Brendan Barnicle conducted a survey of resellers that showed that only 21% of outlets are seeing a bump up in Windows 7 PCs, versus 54% seeing such a bump a year ago, when Microsoft's new operating system went on sale. It's been widely reported that Microsoft had a tough hurdle this quarter to beat big results a year ago when Windows 7 was introduced. Inventory of Win 7 PCs is also not as elevated as a percentage of retail outlets. That said, thanks to enterprise PC sales, client revenue this quarter is not at risk.

Microsoft Has Cut Back On Expenses Which Should Help Multiple Expansion In 2011 (CNBC) Charlie Smith, CIO and Co-Founder of Fort Pitt Capital Group talks Microsoft. "They've gotten religion on expenses," Smith says. He notes that Microsoft has been growing revenues at 9-10% for 10 years and growing earnings at a compound rate of about 10%. The problem is the multiple collapsed over that 10-year period. To change that, Microsoft has gotten aggressive on expenses over the last year which he believes will make a difference in 2011.

Nokia Rumored To Be In Talks With Microsoft To Power Smartphones (VentureBeat)After the lackluster release of Nokia's Symbian-powered N8 smartphone, it's becoming clearer that the company needs software solution. And Nokia has apparently been in discussions with Microsoft about putting its new Windows Phone 7 software on Nokia hardware. A move that Microsoft desperately needs. Microsoft's Windows Phone 7 is a good operating system, but it's unclear if it will help Nokia much. It seems like the smarter play is to join forces with Android. Read more from Business Insider.

Kinect Puts Microsoft In Competition With Apple TV And Google TV Says Exec (All Things Digital)The launch of Kinect means that the Xbox 360 is competing with the Apple TV and Google TV, according to Microsoft's senior Xbox Live marketing director Craig Davison. The technology was designed to widen the Xbox audience beyond hardcore gamers. Davison adds that the makeup of the Xbox audience started changing as soon as 2008, when Netflix was built into the Dashboard. Many now use it as a media hub and that trend will only likely continue.

Microsoft Spends $1.6 Million Lobbying In The Third Quarter (Bloomberg)Microsoft spent $1.63 million in the third quarter to lobby the federal government on a broad range of issues from software piracy to competition in online advertising. That's 9% more than the $1.49 million spent the same quarter last year, but less than the $1.85 million spent in the second quarter. Challenging Google comes at a cost.

S&P 500 Companies More Than Double Buybacks In The Third Quarter (The Street)Much of the recent buyback surge has been driven by technology companies, which fared better than some corporations did last year because of relatively little debt and product demand. In the third quarter, information technology companies, including Microsoft, Hewlett-Packard and IBM, made up nearly 29% of all buybacks, up from 27% in the second quarter.